New Round of Tax Refunds for 1.5 Million Americans
Find out if you're eligible for a new disbursement of tax refunds.
In March of 2021, President Joe Biden signed a coronavirus relief package including several changes intended to help American individuals and families still struggling from the financial impact of the pandemic. One of those changes relates to the way unemployment income is taxed. The bill was retroactive, impacting income taxes and refunds for the 2020 tax year, but millions of Americans had already filed their tax returns by the time the bill was signed.
The tax refunds that began going out at the end of July are adjustments for those people who had already filed their 2020 income taxes before the bill was passed. If you’re someone who doesn’t like to wait until the last minute to file your tax returns, you may be in for a pleasant surprise with the latest round of tax refunds.
What is this New Round of Tax Refunds?
Typically, unemployment payments are taxed as regular income, just like a normal paycheck you would receive from an employer. With the drastic increase in unemployment claims during 2020, because of the Covid-19 pandemic, the tax laws were temporarily changed.
The American Rescue Plan Act of 2021 signed in March by President Biden excludes most of that unemployment income from being subject to federal income taxes. Individuals may be able to exclude up to $10,200, and married couples who file jointly may be able to exclude up to $20,400.
Those who filed 2020 income taxes after the bill was signed in March were able to benefit from these income tax reductions. Those who filed 2020 income taxes prior to the approval of this relief package may have overpaid their taxes. The IRS is now adjusting and correcting the issue by sending refunds to taxpayers who are impacted.
Who Qualifies for a Refund?
According to the IRS, 1.5 million taxpayers will receive this refund, and the average refund is $1,686.
For taxpayers to be eligible for this round of refunds, all of the following must apply:
- 2020 modified adjusted gross income of less than $150,000.
- Received unemployment compensation during 2020.
- Filed income taxes prior to the passing of the relief package in March.
Payments will be made by direct deposit if the IRS has the taxpayers bank account information on file. If you’ve previously paid income taxes or received a refund by direct deposit, you should receive this refund to the same bank account. If the IRS does not have a taxpayer’s bank account details on file, the refund will be sent by check.
It’s important to note that these charges impact federal taxes, but the unemployment income may still be subject to state income taxes.
Anyone who has not filed income taxes for 2020 is urged to do so, because you may be eligible for this refund or other stimulus payments.
What do I Need to do to Get the Refund?
Taxpayers don’t need to take any action. The IRS has reviewed the returns of taxpayers impacted by the change and made the necessary adjustments. The refunds will be sent automatically to those who qualify, so most taxpayers will not need to take any action. However, there are a small number of taxpayers who may need to file an amended return (Form 1040-x).
Taxpayers should file and amendment if they:
- Did not submit a Schedule 8812 to claim the Additional Child Tax Credit and are now eligible for the credit due to changes in modified adjusted gross income after the unemployment compensation exclusion.
- Did not submit a Schedule EIC with to claim the Earned Income Tax Credit and are now eligible for the credit.
- Are now eligible for any other credits and/or deductions.
What if You Need Extra Income But Aren't Eligible for a Refund?
If you were hoping to get a refund check but don't qualify—we've still got some options for you if you're strapped for cash.
Whether you're just looking for a few extra bucks, or you're deep in debt, these ideas could help you to get the cash you need.
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Falling into debt can feel a lot like quicksand. The harder you fight to get out, the deeper you sink.
If your debt is lower than $10k, a personal loan service like AmOne Funds can help you to pay off all your balances so you can consolidate your debt into one bill instead of multiple.
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